aluminum premiums slipped again this week on continued
skittishness about the potential impact of new London Metal
Exchange warehousing rules.
spot P1020 aluminum premium moved to 10 to 11 cents per pound
Sept. 4 from 10.5 to 11 cents previously.
"Its like a long
winter storm. The snow keeps coming," one producer source
Some market sources
worry that premiums will dip into single digits, but others say
warehouse financing deals continue to provide support.
"Everyone believes its going to go lower. But the
contango is still there, so the financing deals are still able
to be done off-warehouseand thats somewhat of a
floor," one buyer said. "I dont know where that floor is,
but its not going to be 5 (cents per pound)."
The LMEs primary
aluminum cash contract ended the official session at $1,754 per
tonne (79.6 cents per pound) Sept. 5, down 2.4 percent from
$1,798 per tonne (81.6 cents per pound) Aug. 29 and 17.4
percent below a high of $2,123 per tonne (96.3 cents per pound)
"People are just
starting to figure out what they are going to buy for next
year," one trader said.
Market trends might
not become clear until after upcoming industry events and, in
particular, once LME rules are finalized, several industry
Under new exchange
proposals, warehouse companies would be required to deliver out
more metal than they draw in at storage locations with long
load-out queues (
amm.com, July 1). A decision is expected in
October, with changes scheduled to take effect in April 2014
amm.com, Aug. 6).
starts picking up later this month. But Im not going to
hold my breath too much for it," a second trader said.
"Consumers are running JIT (just in time), and so they
havent really been in the market. We need some
continues to characterize the market, with some customers on
the fence as they wait for aluminum prices and premiums to
bottom out before making big buys, market sources said. But
others stressed that downstream markets, especially automotive
and aerospace, remain strong despite primary aluminum sector
Other wild cards are
the widely expected U.S. military strikes against Syria, and
the possibility of a wider regional conflagration that could
impact important shipping lanes and drive up energy costs. This
could hurt aluminum producers grappling with low prices and who
are likely unable to contend with any steep cost increases, a
third trader said.
"If the U.S. bombs
Syria, all bets are off. ... This pot has been simmering, and
at some point it could overflow," he said.